End-of-life notice: American Legal Ethics Library

As of March 1, 2013, the Legal Information Institute is no longer maintaining the information in the American Legal Ethics Library. It is no longer possible for us to maintain it at a level of completeness and accuracy given its staffing needs. It is very possible that we will revive it at a future time. At this point, it is in need of a complete technological renovation and reworking of the "correspondent firm" model which successfully sustained it for many years.

Many people have contributed time and effort to the project over the years, and we would like to thank them. In particular, Roger Cramton and Peter Martin not only conceived ALEL but gave much of their own labor to it. We are also grateful to Brad Wendel for his editorial contributions, to Brian Toohey and all at Jones Day for their efforts, and to all of our correspondents and contributors. Thank you.

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Alabama Rules of Professional Conduct

COMMENTS

A lawyer should hold property of others with the care required of a professional fiduciary. Securities should be kept in a safe deposit box, except when some other form of safekeeping is warranted by special circumstances. All property which is the property of clients or third persons should be kept separate from the lawyer’s business and personal property and, if monies, in one or more trust accounts. Separate trust accounts may be warranted when administering estate monies or acting in similar fiduciary capacities.

Lawyers often receive funds from third parties from which the lawyer’s fee will be paid. If there is risk that the client may divert the funds without paying the fee, the lawyer is not required to remit the portion from which the fee is to be paid. However, a lawyer may not hold funds to coerce a client into accepting the lawyer’s contention. The disputed portion of the funds should be kept in trust and the lawyer should suggest means for prompt resolution of the dispute, such as arbitration. The undisputed portion of the funds shall be promptly distributed.

Third parties, such as a client’s creditors, may have just claims against funds or other property in a lawyer’s custody. A lawyer may have a duty under applicable law to protect such third-party claims against wrongful interference by the client, and accordingly may refuse to surrender the property to the client. However, a lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party.

The obligations of a lawyer under this Rule are independent of those arising from activity other than rendering legal services. For example, a lawyer who serves as an escrow agent is governed by the applicable law relating to fiduciaries even though the lawyer does not render legal services in the transaction.

A “clients’ security fund” provides a means through the collective efforts of the bar to reimburse persons who have lost money or property as a result of dishonest conduct of a lawyer. Where such a fund has been established, a lawyer should participate.

A lawyer engaged in active practice is required to maintain a separate account to hold funds of a client, unless the lawyer gives written notice to the Secretary of the Alabama State Bar. A lawyer is engaged in active practice unless the lawyer has obtained membership in the Alabama State Bar pursuant to the provisions of Alabama Code 1975, § § 34-3-17 and -18.

A lawyer who maintains a separate account to hold funds of a client must comply with the Interest on Lawyers’ Trust Accounts provisions, commonly known as IOLTA, unless the lawyer opts out by giving the required written notice.

A lawyer may maintain more than one interest-bearing account to hold clients’ funds in compliance with IOLTA (commonly known as an IOLTA account) and may open an IOLTA account at any time during the year. The depository for an IOLTA account shall remit interest either to the Alabama Law Foundation or to the Alabama Civil Justice Foundation, as the lawyer designates. A lawyer may change the beneficiary of an IOLTA account at any time. A lawyer who does not intend to maintain an IOLTA account must notify the Secretary of the Alabama State Bar as provided by Rule 1.15(g); a law firm may notify the Bar on behalf of its lawyers.